CMA CMA Lease & Contract Analysis 1

Question 1

Which lease clause allows a lessee to maintain the lease beyond the primary term if production is occurring in paying quantities?

Accepted Answer

Habendum clause

Answer

The habendum clause defines the lease's duration, including the condition that production in paying quantities extends the lease beyond the primary term.

Question 2

A minerals appraiser reviewing a lease finds it contains a 'Pugh clause.' What does this clause primarily accomplish?

Accepted Answer

It releases acreage not held by production from the lease

Answer

A Pugh clause releases non-producing acreage or formations from the lease at the end of the primary term, preventing a single well from holding an entire large tract.

Question 3

What is the standard minimum royalty rate in a US oil and gas lease on private lands?

Accepted Answer

1/8 (12.5%)

Answer

The traditional minimum royalty on private US mineral leases is 1/8 (12.5%), though modern leases often negotiate higher rates.

Question 4

In a mineral lease, which clause typically grants the lessee the right to use surface resources such as water for operations?

Accepted Answer

Granting clause

Answer

The granting clause defines what rights are conveyed to the lessee, and in many leases this includes ancillary surface rights needed for operations.

Question 5

What does a 'shut-in royalty' provision in a mineral lease allow?

Accepted Answer

The lessee to hold the lease by paying a nominal royalty when a gas well cannot market its production

Answer

A shut-in royalty clause allows a lessee to maintain a lease by paying a small nominal royalty when a completed gas well has no market for its production.

(CMA) Certified Minerals Appraiser Practice Test

(CMA) Certified Minerals Appraiser Practice Test

CMA CMA Lease & Contract Analysis 1